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Nightly Business Report

News/Business. (2009) Michael Mandel, BusinessWeek. New. (CC) (Stereo)

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America 9, Ken Lewis 4, Paul 3, Darren Gersh 2, S&p 2, Washington 2, Us 2, Scott Gurvey 2, Benmosche Expectedo 1, Clunrs 1, Mandel 1, Mike Mandel 1, Paul Kangas Wishin 1, Mimum 1, Stephanie 1, Womethe 1, Duda 1, Nancial 1, Groh 1, Ade 1,
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  WETA    Nightly Business Report    News/Business.  (2009) Michael  
   Mandel, BusinessWeek. New. (CC) (Stereo)  

    August 3, 2009
    6:30 - 7:00pm EDT  

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ptioning spoored by wpbt >> paul: twoig developments for bank of amica and embattlec.e.o. ken lewis. thbank settles s.e.c. charges it misled inveors about bonusefor merrill lynch execs. and b-o-a hires e of the best- knn women onall street shakinup its top management. we get insight on both mov from veteran banng analyst dick bove. >> susie: cash for clunks drives a rebou in auto sales ving ford its first positive sales growth in ov a year. but the progras future and fundg are still up in the air. >> paul: then the markets stt e month on a tear with the s 500 pushing abovone-thousand for e first time since last fall. how long will the rally last? some ansrs, coming up. >> susie: en, a problem at ple's core. goog c.e.o. eric schmidt is stepping down from app's board of direcrs. we'll tell y why.
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>> paul: i'm paul kangas. >> susie: and i'susie gharib. th is "nightly business report" for monday, augu 3. "nightly business rert" is made ssible by:
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this program was made possib by contributns to your pbs station from viewers like yo thank you. >> susie: go evening, everyo. management shake-up and a $3 million s.e.c. stlement at bank oamerica today. the banking git paid the fine to settle a mplaint it misled inveors about billions of dolls in bonuses paid to top executives at merrillynch afr b-o-a bought the brokerage. the bank also shuffled its nior managers hiring former citigroup executive saie krawcheck run b-o-a's global wealth management unit th puts kracheck firmly in the race to succeed c.o. ken lewis. we begin our coverage wi darren gersh a more on that s.c. fine: >> reporter:f a statement cod breath aigh of relief, you'd have heard it fromank of america toy. the company dinot admit or deny the securities and change coission's charges, but a bank
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okesman called the settlemen a constructive cclusion. lel experts said it was worth noting the s.e.c. d not charge bankf america th fraud. finance professor james gel says a fraudharge would have trigged much stiffer pelties. >> the fact thatt was mislding and that they are not arresting people for secities aud shows that they may real think it was morof a paperwork error than an intentnal scam on the plic. >> reporr: regulators charge the documents bank oamerica sent to instors explaining its deal to buy merrillynch were false d misleading. that because bank of america said no bonuses would be paiat merrill witht b of a's approv. bank of amica did not disclose $5.8 blion in bonuses had, in fact, already been approvefor payment to mrill executives. members of congress ve spent many hours lookingnto charges ba regulators pushed bank of america ceo ken wis into a shotgun marriage with a falting merrill lynch.
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ngressional critic darrell issa says th settlement wraps up just onpart of that contversy. >> it doesn't redu the fact that ts was a sloppy job, done quickl at the bequest, to a great extent of the governnt that was more interest by the statements of beanke and paulson. they were more interested in global market medown than they we the accuracy of this merger. reporter: with the fi today, ang says the s.e.c. is now sending a new message. >> it sends a stro signal to dealmake everywhe, you ally need disclose everytng. >> reporter: and iserves as a remier that what angel calls the "bonus culture" istill as contversial as it has ever been. darren gersh"nightly business report", washington. >> susiejoining us now with more analysis, richard bov veteran banking analyst rochdale securits. >>uzanne: let's get right to the $3 million settle -- $33
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settle., shod it have been mo? >> i don't thi it should have en more. i don't ink the government should tell a companyo do something en fine them after they do it. but $33 million is very small relative to the $5.8illion in bonusthat were paid. i'd say just a slap on the wrist. it wasn't meaningful stement byhe government. >> shareholders have beenery angry about this whole b of a/merrill lynch merger, suld th be satisfied been is news? >>ou can't besatisfied if the sec fis your company but i ink they haveo feel some degree of relief th there will be no further activy related to this situatn. that it wil not ht their stock price, will not hurt their company. they can move on andorget this for the moment. >> do you think new yor attorney generalill move on, they have been grilling nk of america overall of these devepments for months now. is it over? is thi chapter over?
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>> i think it is. i think tha congress move on to much bigger issue nsidering the financial dustry. i think that all of these proposalthat have beenent to congress by thpresident as well as the iues that have been introduced in to congress as a result of sheila behr, the ic desires. all of these thgs have to be discussed. on the healthcare issue gs out of t way this is going t be a major debate. >> susie do you think that thissettlement will se a precedent for other financi terms, might we see that the sec will slap fines on other financial firms o maybe even a firm like aig? >> i think there's a strong demands on the parof the public. the congress feels it, th regulators feel ito do something about the excesses that have occurred in the financial industry. therefore, i wou not be surised at all ifeaw additional fines, but if they're going to be like this one, they'rsimplyoing to be,f you ll, eye wash not going to be meaningful.
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>> susie: wt does all of this mean fornvestors who o ba of america stock? is it trading around $15. it was up around $15. is it -- does it make stones put new money this, buy or sell? >>ery definitely bieve they should be ying it and buying it not becausef settlemt or the controversy in coness. because i thk that the loan losses at bankf america will come down over the next couple of yearsllowing earnings to surge. it's that earningurge that the vestor should focusn that's what they should buy in to. i would buying bank of america stock tomorrow morni. >> susie: let talk about the magementhanges that were announced today. is ken lewis on his way out or did he survi all of this? >> i think ken lewis is very strongly in contl of bank of amera. i don't think ere's any likelihoodhatsoever that anyone isoing to pus him ase. i know that it's discussed often by politicians, by the pres but oubt that there is going
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to be any change there. i think mr.oynihan moves in to top positio asnext possible successor of mr. lewis, sply because the guy who run t retail bank generally takes or the he of bank ever america -- >> susie: are you saying that sally, the n executive who was just hired today fmerly from citigroup will -- i not being groomed to take ov from ken lewis? >> i don't thi there's any likelihood whatsoever of her taking over. but i think that this will harm herf this type of nversation continues. in other words, if the press decides thatthey are going to set up sally the way they did at citigroup, it's only goi to hu her and only going to harm her. she's avery effectiv executive, she's an extraordinarily bright and capable won and she should be allowed to just do her job at nk of erica, or merrill lynch in this case, witut the obstruction of being thought of as an ex-sec saysorto ken lewis which she is not. >> sus: very interesng.
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before we go any disclosur to makebout bank of america? >> i don't d busins with them. >> sie: thank you so much for coming on theprogram as always. >> thankou. >> susie: my gue tonight: richarbove, veteran banking analyst at rochdale secuties. >> paul: wall streetegan august continuing uly's winning wa thanks to more ports suggesting a recoverin economy. june cstruction spending rose 0.3% when a op was expected whilan easing of activity in the manufacturing sect at a slower pacin july than in ne. these factors had the doup 102 pots at mid-session with the nasdaq up 25 points. the ability of seval major stock inces to push above majoresistance levels lifted the market to the day's bes level at the fin bell.
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>> susie: the monthly sas numbers are and ford motor is the big winner in the ash for clunkersbonanza. anks to the government rebat program sales atord surged 2.4% lt month. at's ford's first year-over- year gain in almost two yes. at gener motors, sales continued to slidedown 19% but g.m. said cash for clunks is helping to sbilize the indust.
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chsler sales fell 9% and toyota's were down over %. but as stephanie de reports without additional funng cash forlunkers could stop on a dime. >> reporter: hearing news th cash for clunkerprogram could end, heather andatt cronin ove into the sheehy dealersh today. they're looking to te advantage of t $4,500 for theiold jeep. >> it's a sutantial amount, it makes it worth us doing it n rather than waitg. reporter: cash for clunkers drove more than 50sales at dealer vince shey's 14 outlets. that pick-up ibusiness may leado new hires, after lay- off's last year. when this program kicked in we're very short-staff, we're gog to have people working through the night toght just to process dealsnder the program, but we're hopul that we can probly add back maybe 10% back to our workforce. >>eporter: while there is some concern the cash forlunkers program cod slow future sales, the hope is that t new-found montum will contin long after the ogram is gone.
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shee says those buyers wouldn't have come without t incentives. >> if you look at thclunkers, it's not our typical trade-i so yeah, probly, maybe a third of those we deals that would have been de later on this year, probably twohirds were from people who re not intending buy a new car, maybe atome point down the road would have bought a ud car. >> reporter: the future of ch for clunkers iin doubt. e senate has yet to take up the measure and seral lawmaks oppose increasing funding. e transportation department easethe restrictions, so dealers no longer have ttrash vehicles beforthe paperwork cabe processed. sheehy is worried about w the program wi end. >> we have $1.8 million in receivablefrom the federal governmentnd the messaging coming out of the white hous and the department of transportation have be very mixed, reporter: the senate may vo on the issue wedsday or thursday. >> rorter: in the meantime,
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dealers are still offeng cash for clunrs. but customers have to ree to return thear or pay the dierence if the government does pay have the mone stephanie dhue, ightly business rort", washington. beginng of november. as we reported, 1,000 on t s&p 500. the broamarket index has proved by more th 48%. om its mid-march. so, womethe bull run continue or is the end in sight? scott gurvey getsome answers fromall street: >> reporter: it was thbest july in 20 years for wall reet
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with the standard and poor five hundred gaing 7.5%. and august is off to atrong start. with thendex topping 1,000 for the first time since novber. thrally has bears and short sellers running for ver. but market watcherail dudack says ill be difficult to keep up the momentum. >> ihink getting the market up to the one thousand vel on the s&p isn many ways the easy part. i think the hard part will be getting thmarket beyond, sutantially beyond one thousand. because to do that you reall have to have a sid feel for whatwo thousand and ten's earnings picture will beike. >> reporter: second quarte earnings surpris have been mostlyositive. d analysts have been raising projections for thquarters ahead. lton ezrati of lord abbett expects earnings to good. >> wwill see stronger numbers for two reasons. one is because theconomy has turnedut also the comparisons, keep in mind the numberse see are alwaysgainst the
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comparableuarter in the prious year. thingsere falling apart this time lt year so the coarisons are going to be much easier. >> reporter: butill there be jobsmost economists agree the stock rket rally needs to be confirmed by economic grth. a healthy econy requires consum spending and consumers won't spend unless they feel they have job secuty. duda says with all the government involvement in th economy, it is n clear what ll happen when the uncle sam steps back. >> mbig concern is what happens when some of this stimulus subsides. wh's gonna happen to the job market in the fourthuarter this year d the first quarter of next year. so where i've been very timistic up until now the market has gotten to where thinis fair but to get beyond fair iant to feel better about thfirst quarter two thousand ten and i think thiss still ve fuzzy. >> rorter: the employment report for july, d out on friday, is seen as critil to market psychogy going forward. jobs losses are expected.
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but experts say if the losse are fewer thanhree hundred thound, the market will take it as a bullish sign. scott gurvey, "night business report new york. >> paul: now, let's take look at some stks in the news toght.
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and those are the stocks ithe news tonightsusie. >> susie: tomoow, with lender cit stilon life support, we look at coercial lending and when credit could start flowg. >> sie: there's a new leader at bailed out insurer g the company's fth in four years. robert benmosc the former c.e.o. of met-life, ll replace edwardiddy. liddy held theob for less than year. toing the new c.e.o.'s agenda:
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lling the company's assets, paying bk government aid and deciding whether to contin paying controveral bonuses. benmosche expectedo start his new b monday. >> paul: federalegulators want thformer head of k-mart to pay $22 million for mieading investors. ths.e.c. accused charles conaway of ientionally lying to analysts anconcealing information fr k-mart's directs. a jury found him lble in june. naway's lawyer says his clients' actions werin the best interest of k-mart' shareholders. a hearing is set for septemb 16.
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>> susie: toght's commentator says americans need a lessonn ecomics 101. he's me mandel chief economist at "businessweek." >> enomic literacy is a phrase that we don't hear mh. but it's gng to become more important in the days ahead. face a growing mountain of critical economic issues: heth ca, taxes, budget deficits, the nancial crisis. unemployment, ade, protectionism, mimum wage, antitrust, innovation, groh, retirement, and education. the list goes onnd on. what's more, tre's no single rit answer to any of these. i can line up republe economts on both sides of almost any economic toc-
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sometimes three four sides. as vots and citizens, americanseem to have a strong desire to understand these issues. but there's a big gain economic litery. journalistic pieces on the economy are accessiblend easy to read, but they raly provide the sic economic theory and principles. by contrast, most onomic textbookgive the dry theory without much connection to current events. now, there are pnty of groups whdeal with economic literacy for school children, likthe national couil on economic edation. and college studentsof course, get to take basieconomics course but for adults who care abt the economic choices thawe make as a ciety, the options are much sparser. i think we need to start figuring out a wayo get americans the informatn and derstanding about the econom that they need to make infmed decisions. that could bin print, online, or through videos. but we have make economic literacy one oour biggest prioties. i'm mike mandel.
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that's "nightly buness report" for nday, august 3. want to remind you this is the time of year yr public televisi station seeks your support. >> pau support that makes programs like nightly busiss report possibl >> susie: thanks for joinings. and don't forg to support your public television statio i'm susie ghar. goodnight, eveone. you too, paul paul: goodnight susie. i'm paul kangas wishin all of you the bt of good buys. "nightly business reportis made possie by: thisrogram was made possible by contributions tyour pbs station from viewers like yo thank you. captioning sponsored by wpbt ptioned by mea access group at wgbh access.wgbh.org
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